Adam Smith -An Inquiry into the Nature and Causes of the Wealth of Nations

This is a vast treatise about economy. It makes you understand how wealth is generated. Smith talks about rent, stocks, bonds, bank contracts, colonies, and things that make people wealthy. He explains why people produce more and much better if their work is redistributed among workers (division of labor). He is opposed to taxation on imports and exports. He believs that an invisible hand rules the market and makes everyone wealthy. He argues government should not intervene much in the private sector.

Freakonomics by Steven D. Levitt and Stephen J. Dubner

This book is a collection of simple observations of the US society, and of the use of regression analysis to determine which variables affect social behaviors. For example: they find out that the prices of houses sold and owned by real estate agents are higher than the average prices; also, some teachers cheat to get better stats for their classes because of the laws.

The Intelligent Investor by Benjamin Graham

This books explains how to choose stocks, and how much to invest. Graham favors a 50-50 division between bonds and industrial stocks. The intelligent investor knows that stocks are more risky when their prices rise, and that they are less risky when their prices fall. You should buy neglected and undervalued stocks, and sell the popular and overvalued stocks. Graham highlights cycles of 5 years in the stock exchange, when the value of the Dow approximately doubles. If it grows more than the double, there will be a strong correction. In 1924-1929 there was a 5 year super bull (S&P increased from 6 to 24, which was 400% in 5 years), followed by a hard crash. Also, S&P increased 200% between 95' and 2000, then there was a massive crash. Investors who want to buy individual shares should diversify the shares: they should buy a minimum of 10 and a maximum of 30; each company should be large, prominent and conservatively financed, with long records of continuous dividend payments. Mutual funds are the best solution for the defensive investor, because they don't have to police their portfolio and a professional will pick, watch and diversity the stocks for them. The monthly purchase plan, aka permanent autopilot portfolio (which puts a little bit of your money to work every month in predetermined investments), seems by far the best way of investing money in the stock market.